Cesp Gains as Credit Suisse Sees More Cash Flow: Sao Paulo Mover

By Denyse Godoy -
Mar 11, 2013

Cia. Energetica de Sao Paulo,
Brazil’s second-largest power generator by capacity, rose to a
one-month high as Credit Suisse Group AG recommended buying the
stock, citing rule changes that are expected to boost cash flow.

Shares rose 4 percent to 20.01 reais at 1:57 p.m. in Sao
Paulo. A close at that level would be the highest since Feb. 6.
The benchmark Bovespa index fell 0.8 percent.

Cesp, as the company is also known, stands to benefit from
new rules affecting both the cost as well as pricing of the
electricity it sells, Credit Suisse analysts Vinicius Canheu and
Adelia Souza wrote in a note to clients dated today. The changes
“brought two important upsides for Cesp’s cash generation in
the short term,” they wrote.

The Sao Paulo-based utility’s total revenue was 3.4 billion
reais ($1.7 billion) in 2012, according to the average estimate
of 13 analysts surveyed by Bloomberg. Credit Suisse projects
sales will rise to 3.92 billion reais this year and 4.24 billion
reais in 2014.

Credit Suisse raised its recommendation on the stock to the
equivalent of buy from hold with a target price of 24 reais.
Cesp fell 0.7 percent this year through March 8 while the
Bovespa declined 4.1 percent during the same period.